Sunday, April 13, 2008

A Grim Year For The Working Poor

Brown just helped himself

Brown's 2007 Budget will surely go down as one of most cynical and heartless acts of political opportunism in fiscal history. Intent on grabbing headlines with his 2p income tax cut - in which he initially succeeded - he robbed a huge amount of cash from the working poor with his abolition of the 10p starting rate.

He and Darling initially maintained that the poor would benefit from his simultaneous increase in various tax credits. But as the IFS and others have since demonstrated, even taking account of that, over 5m households are net losers (see this blog).

The Village Postmaster has just given his staff their first wage packets since the changes took effect. And he has discovered the appalling truth - it's his lowest paid staff who have been clobbered hardest.

In particular, he quotes the example of a full-time single male employee whose weekly tax has doubled, from £15.40p to £30. And for him, that's a 6.5% cut in his net take-home pay.

A 6.5% cut! I feel ashamed.

Especially when I read this is someone who spent nearly a year on benefits before he started with the Postmaster. The very sort of person who should be rewarded for getting off his butt, not smashed over the head.

As the Postmaster says, "for any government to crush someone like him who wants work and not be a burden on the state is utterly shameful".

(Note this man is single and childless, which in Labour's eyes makes him the undeserving poor - see previous blog).

No wonder Brown's poll ratings have slumped faster than any PM since Chamberlain in May 1940. But at least Chamberlain then got slung out. We're facing another two years of this charlatan.

Just thank God it's not May 1940 with Brown in charge: can you imagine? These are dark days, but we have not yet been entirely over-run. The one-size fiscal superstate failed to get us in 1940, and with luck will go on failing. It does still remain open (just) for a future British government to really help the working poor by substantially increasing the personal tax-free allowance.

Dave and George, maybe?

Hmm.

PS Yes, we realise raising the personal tax allowance is expensive- according to HMT a £1000 increase would cost £6-7bn pa. But it's a much clearer and administratively cheaper way of helping and incentivising the working poor to help themselves than Brown's horrific tax credit system. (Plus of course, the actual costs would end up a deal lower than the HMT headlines because of the so-called dynamic supply side effects- eg see here).

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